The future of patents, all eyes up on high

Just a few short years after the America Invents Act brought some of the most sweeping changes to the patent landscape in 50 years, the Supreme Court is set to bring its own not-so-quiet revolution to patent law this term. Ironically, one would need to also go back 50 years to find another decade when the Supreme Court took up more patent cases (and at the current rate, we might need to reach back to the record of 145 cases set in the 1880’s). So what are the biggest cases up this term, and why does it matter to in-house counsel?

Fee shifting

In late April, while a patent reform bill was still being debated in the Senate Judiciary Committee, the Supreme Court decided two cases that make it easier for litigants to recover fees in patent litigations. In unanimous decisions, the Court relaxed two Federal Circuit standards that control awards under 35 U.S.C. § 285, which allows judges to order losing parties (patentees and defendants) in patent cases to pay the prevailing party’s attorneys’ fees.

In the first case, Octane Fitness v. Icon Health & Fitness, the Supreme Court rejected the Federal Circuit’s old sanctionable conduct standard as overly rigid, holding that judges can award attorneys’ fees in an exceptional case that merely “stands out from others,” — i.e., a party's unreasonable conduct was exceptional enough to justify an award of fees. Under this new standard, a case that stands out for either the substantive weakness of a party's litigating position or the unreasonable manner in which the case was litigated would sufficiently set itself apart from other cases to warrant a fee award. The Supreme Court also held that patent litigants need not establish entitlement to fees by clear and convincing evidence. Rather, a preponderance of the evidence standard will apply.

In the second case, Highmark v. Allcare Health Management System, the Supreme Court held that a trial court’s decision to award attorneys’ fees is entitled to deference on appeal, not the de novo standard previously used by the Federal Circuit. This makes decisions less likely to be overturned. In-house counsel should carefully consider these cases in any patent litigation because they raise the possibility of fee shifting for either the patentee or the defendant. This risk should be factored into any litigation analysis.

Is software patentable?

Potentially one of the most wide-reaching decisions yet to come out will be Alice v. CLS Bank where the Court is asked to weigh in on what types of software are patentable. The narrow issue in the case involves a computerized method of escrowing money to facilitate inter-bank transfers. However, the Court’s decision is widely expected to touch on the patentability of software more broadly. The case’s possible impact on in-house counsel, and your businesses, is tremendous because many of today’s most valuable new inventions rely on computer systems. In-house counsel should be prepared to take a close look at their patent portfolios after the decision to determine whether any existing patents have been put at risk, and to work with prosecution counsel to revise their prosecution strategies as necessary.

Ambiguous claims

Many of the complaints against patent litigation today are that patent claims are simply impossible to understand. The Supreme Court will have its say on ambiguous claims in Nautilus v. Biosig. Currently, claims are permissible unless they are “insolubly ambiguous.” It is likely that the Supreme Court will adopt a lower standard to invalidate a potentially ambiguous claim, making it easier for defendants in patent litigation to challenge patents. In-house counsel should closely review the current claims in their patent portfolio to determine whether the new standard, when announced, threatens any of them.

Who is infringing that patent?

Finally, in Limelight v. Akami, the Supreme Court will answer the question of what it means to jointly infringe a patent on a method. In other words, does a single entity need to perform all of the elements of a method claim or, as the law currently stands, can two or more parties collectively perform all of the elements of the claim and both be liable for infringement? While many experts believe that the Court will largely maintain the status quo, the decision will potentially alter who is infringing a patent. Both patentees and defendants will need to assess what impact the decision has upon their businesses and litigations.

With the Supreme Court taking such an active interest in patents over the last several years, the Court has opened a third front, along with Congress and the Federal Circuit, for in-house counsel to watch for significant changes in the law. Now that you know what is being decided in 2014 the biggest question is: What does the Supreme Court have in store for us in 2015?